This article will attempt to give you a clearer picture of the components of Ad Exchange and Ad Network and how they are different from each other.
Quite often, when it comes to programmatic advertising and increasing online advertisement revenues, publishers have to struggle with a number of terms and jargon, and they find themselves in a tough spot trying to figure out what exactly is what! Ad Exchanges and Ad Networks are two such terms that publishers ought to be aware of and, of course, in a way that will work to their advantage.
The first thing to know about them is that they are not the same. However, both of them play pivotal roles in the programmatic ad model and are equally important for both publishers and advertisers as they go on to strategize their ad models.
This becomes all the more relevant considering programmatic sales in ads on a global level are projected to reach $725 billion by the year 2026. This is based on the forecast that the count of internet users will also exponentially rise to 5.3 billion by 2023.
Also Have a Look: Best Ads Exchanges for Publishers in 2023 (Top 10)
- What is the Ad Network?
- What is the Ad Exchange?
- Ad Network V/s Ad Exchange – How are they Different?
- How Do Ad Networks Function?
- How Do Ad Exchanges Function?
- In a Nutshell
What is Ad Network?
The Ad Network is actually a company or an enterprise which functions by purchasing ad inventory in bulk from the publishers and reselling it to the advertisers.
Ad Networks usually have to handle a huge number of impressions, and this enables them to sort and categorize these impressions into segments, which the advertisers will be interested in when they have a specific target audience in mind.
So essentially, they can resell these impressions, which they bought in bulk, to advertisers as a new premium package and make huge profits out of them.
Read More: 22 Best Ad Networks for Publishers [in 2023]
What is the Ad Exchange?
The Ad Exchange is nothing but a digital marketplace, where through the process of RTB or Real Time Bidding, the sale and purchase of ad inventory happens between publishers and advertisers, respectively.
The entire process of bidding auctions for each and every ad impression happen within a moment, all in real-time, and advertisers can issue the bids automatically through preset parameters of purchasing.
Another interesting thing to know about them is that they do not have any standalone existence. There were such standalone Ad Exchanges years back, but once the companies and advertising tools became aware of their revenue potential, they bought many of the Ad Exchanges that already existed.
Sometimes they would even create their own Ad Exchange and introduce them into their offerings. In fact, most of the SSPs have their own Ad Exchanges, which you will get access to when you function with that SSP.
Ad Network Vs. Ad Exchange – How Are they Different?
To put it simply, ad exchanges offer a platform where publishers and advertisers can both conduct their business. Ad Networks, on the other hand, buy ad impressions in bulk from publishers only to repackage and resell them to advertisers at a higher price and for a profit. These may be the very basic difference between the two, but there’s more than what meets the eye. Here are the points where they differ:
Ad Networks do not offer any transparency, so to speak. Advertisers almost hardly get to know when and where their ads might appear or exactly who the parties are getting a cut from their budget.
Publishers, too, don’t get much optimization control over their inventory and do not get any information on the advertisers and their movements.
On the other hand, Ad Exchanges inform the advertisers about what changes are made in the transactions and ad inventory costs. This introduces complete transparency in the process of media buying. Publishers and advertisers are also aware of one another and the transactions that are conducted.
Ad Networks only offer premium options for inventory, i.e. inventory that is high both in quality and price. On the other hand, Ad Exchanges offer both premia as well as the extra, unsold options of inventory.
When it comes to Ad Networks, they take their shares by getting for themselves a cut from the revenue or by hiking their prices. Ad Exchanges have a different setup altogether. They have three options for pricing:
- Sell Margin – Publishers will pay a percentage of commission to the platform when an inventory is sold.
- Setup Fee – Publishers charge a flat fee for their inventory. This amount is not refundable.
- Buy Margin – In this case, the advertisers pay a percentage of commission when they buy an inventory.
Ad Networks usually cater to ad agencies as well as advertisers. However, Ad Exchanges not only cater to them but also to Demand-Side-Platforms or DSPs, Supply-Side-Platforms or SSPs, as well as Ad Networks, which buy from them.
For Ad Networks, the price for the publishers remains fixed, i.e. the premium price. The charge may also be on the basis of per thousand impressions/click-throughs (CPMs/CPCs). This means that your payment will be dependent on how often an ad is clicked on or shown on your website.
In the case of Ad Exchanges, the price of the inventory fluctuates as it is determined by RTB or Real-Time Bidding.
Types of Ad Networks vs Ad Exchanges
Ad Networks are usually of the following types:
- Vertical Networks
- Premium Networks
- Blind or Horizontal Networks
- Vertical Networks
- Inventory-Specific or Specialized Networks
- Affiliate and Performance Networks
Ad Exchanges have the following types:
- Private Exchanges
- Open Exchanges
- Preferred Deals
How Do Ad Networks Function?
An Ad Network basically collects multiple publishers looking forward to selling their inventory to advertisers. The advertiser makes use of the campaign management panel of the Ad Network to set up the parameters of their campaign.
Now after a user clicks on their site, the publisher sends out a bid request while the details of the users are sent with the help of an ad tag.
The latter contains various relevant information regarding the advertisement space, like the visitor and the ad placement. When a match is found between the inventory of a publisher and the campaign of an advertiser, the details of the ad are sent to the ad server of the publisher.
Also Read: What is Google Ads Exchange: Definition, Benefits, How to Get Access, & More
How Do Ad Exchanges Function?
In order to sell inventory, a publisher will make use of a Supply-Side Platform or SSP to offer their ad inventory to the Ad Exchanges. They offer all necessary information to the SSP, which includes price floor amount, page location as well as buyer personas.
On the other hand, the advertiser will take the help of the DSP or the Demand-Side-Platform to connect with an Ad Exchange for the additional space. Now, when a user visits the website or the mobile app of the publisher, an ad request goes out to DSPs and a number of Ad Exchanges via the ad server of the publisher.
As soon as the ad request is sent, the Ad Exchanges immediately send a bid request to the Demand-Side-Platforms.
Now it is up to the DSPs to decide whether that specific bid request will be of interest to the advertiser.
If the results are positive, the DSPs will respond to these Ad Exchanges along with the info they require.
This information is then analyzed by the Ad Exchanges to figure out the best bidder for that specific inventory. The Exchange then selects the most suitable and the highest bidder while the ad goes live. The best part is that it all happens in milliseconds.
In a Nutshell
In this debate regarding Ad Exchanges V/s Ad Networks, usually, the Ad Exchanges seem to be the winner when it comes to the publishers. However, it is fair to say that every case is different. But the main reason for this is that Ad Exchanges choose the publishers and their revenue as their priority, and like Ad Networks, they do not attempt to undersell the publishers.
There is, however, one thing to remember, and that is, Ad Networks sometimes comprise a healthy strategy for ad revenues. GoogleSense happens to be one of the best steps that a startup publisher can take while generating revenue.
Therefore, the smart thing is to weigh all the options and take an informed decision for benefits in the long run.
You can consult our experts to help you choose the right option between ad networks or ad exchanges, sign up here.
An AD Network is a platform that connects advertisers with publishers to deliver and display advertisements to target audiences.
An AD Network operates by aggregating ad space from multiple publishers and selling it to advertisers. Advertisers create campaigns and bid for ad placements, and the network uses algorithms to determine where to place the ads for maximum impact and return on investment.
AD Networks provide convenience and efficiency for both advertisers and publishers. Advertisers benefit from access to a large pool of publishers and the ability to target specific demographics, while publishers benefit from increased ad revenue and reduced need for sales and marketing efforts.
An Ad Exchange is a platform that enables the buying and selling of ad inventory through real-time bidding.
Ad Exchanges work by connecting advertisers and publishers in a centralized marketplace where they can buy and sell ad inventory in real-time. Advertisers place bids on ad inventory they are interested in, and the exchange uses algorithms to determine the highest bid and allocate the ad space accordingly.
Ad Exchanges offer benefits for both advertisers and publishers, including increased transparency, more efficient ad buying and selling processes, and the ability to target specific audiences.